November 28, 2007

Gordon Brown and Prime Minister’s Question Time.

The new British Prime Minister, Gordon Brown, is in trouble. He is being overwhelmed at the moment by what a former Prime Minister, Harold Macmillan, called ‘events, dear boy, events’. The Opposition Parties had a field day this week. What were the issues? Why does Prime Minister’s Question Time matter?

The British Government has not had a good time recently. First there was the loss in the governmental post of confidential CDs containing data on 25 million citizens. MPs, political journalists and commentators poured scorn on the government and its administration. The dust was still in the air when along came another political hot potato: the issue of government sleaze. Just as the Prime Minister was trying to re-establish his priorities after the problems of a potential foot-and-mouth epidemic, and the problems causes by summer floods, up comes the issue of unlawful donations to Labour Party funds. It transpires that a British business man, and friend of Tony Blair, has been giving significant donations to the Labour Party under other peoples’ names. This has been going on, according to the BBC, for four years. Some in the Party knew about this and turned contributions down, others, who claim that they did not know about this, including senior members of Brown’s cabinet, accepted donations and claim not to have known. The scandal has already caused the resignation of the Party’s General Secretary, a major blow to the Party and hence to the Government. John Mendelson, the Party fund-raiser, and Brown appointee, knew about the arrangements and has not reported them to Gordon Brown. More resignations are likely. The sleaze raises questions about Gordon Brown’s authority. It really does look like a mess.

Prime Minister’s Question Time (PMQT) is a significant feature of British democracy. Once a week during the Parliamentary session, a Prime Minister must face the Opposition MPs for half-an-hour every Wednesday afternoon. It can be a very rough ride when ‘events’ are not moving in a Government’s favor. This week, Gordon brown sat grim-faced on the Government front-bench as the Commons witnessed the Government’s humiliation. The leader of the Official Opposition can make a number of unscripted interventions. The leader of the third largest part, the Liberal Democrats, can make two. The questions can be fast, furious and devastating as they were today. Gordon Brown is briefed for the occasion but must essentially think out the answers on the spur of the moment.

Does PMQT matter? The House of Commons is a confrontational pit and a place in which politics can be transformed into drama in a way that vividly reveals the mood of government or of the country. Brown today was subjected to a brutal series of attacks that will have unsettled his followers and damaged the moral of the Government. David Cameron effectively displayed his Parliamentary power in a very noisy House and greatly boosted Conservative Party moral whilst members of the Government cringed. He depicted Brown as a control fanatic who has lost control. The greatest cheer went up when the Acting Leader of the Liberal Democrats said that the Prime Minister has been transformed ‘from Stalin to Mr. Bean’. PMQT sets a tone and Brown’s Government is looking very battered: problems in the financial sector; floods; potential foot-and-mouth incident; confidential information lost in the post and now sleaze. Leadership failure at PMQT for government and for the Opposition leadership can be fatal to a political career. This evening, Gordon Brown is looking very vulnerable. He will need to take quick action to restore his reputation. It does not end here.

November 19, 2007

Sarkozy and the will to reform

The French voted in a reformist President. With high and sustained levels unemployment (particularly for young people), high levels of public expenditure and high levels of protected employment, change was seen to have been required. But it is now time to deliver on reform and this means tackling, amongst other things, the trade unions and existing attitudes to social security. He has chosen to start with the public sector, broadly defined. What is he up against? Will he succeed?

Sarkozy was elected on a change-oriented policy platform and he is busy reminding the French public of his and their commitment. Making reforms involves challenging vested interests. The specify issue is concerned with economic privileges in the rail system. Currently the railway Unions have public opinion moving against them but there is always a question as to how many frustrations commuters will put up with. The main dispute is that some rail workers can retire early (at fifty) whilst most other rail workers and most other workers more widely must work for a much longer time before they can retire. Sarkozy needs the backing of public opinion if he is to be able to hold firm on his reforms. His reforms have been described by the BBC as ‘cautious’ but even ‘cautious’ reform goes against the grain of many in France. What is more the present rail strike was preceded by transportation disruptions during October.

The general issue is that state spending is high and needs to be cut. Social welfare is a significant element of state spending, as is Higher Education. If Sarkozy can delay retirement and make people take more responsibility for their retirement pensions then the state deficit may be cured. Pensions and health care are central because the population is aging over time. If he can introduce an element of student fees, as has happened recently in the UK, this will also help balance the budget. The EU Monetary Authorities require that government spending be considered in the light of EU monetary policy and the French need to respond. There is more at stake that simply the French domestic budget. France is not alone in these terms. The Italian state is facing a similar set of issues.

The danger is that Sarkozy will be forced to make a u-turn. After several days of strikes, tempers are fraught. Unions are supported by others who do not like the ‘Thatcherite’ turn of French politics (attacks on social welfare and the selling off, even if only in a limited way, of state-owned enterprises). He has chosen a target that is ‘soft’ in the sense that the imbalance in pension rights is clearly questionable but rail strikes bring real costs to the public and the reactions can be unpredictable. It is also a ‘hard’ area because of the Union’s power to disrupt daily life. Speed is of the essence and both sides of the dispute are aware of that.

France cannot have it both ways. It either accepts the status quo and hence high levels of economic inflexibility and unemployment, accompanied by generous holidays and low hours of full-time employment for those in work and a degree of isolation from the global economy or it can accept reform and the difficulties, displacements and profound uncertainties that reforms and embracing the global economy bring. Sarkozy is likely to hold firm but he needs to ensure that talks take place quickly and to ensure that the strike, coupled with student and other issues, does not become part of a wider protest over reform. His clain to be a reformer is now under close scrutiny.

November 14, 2007

Pakistan is in crisis.

President Pervez Musharraf is in trouble. On Saturday 3 November, Musharraf declared a state of emergency. He did so in his capacity not as President but as head of the armed forces. He did so against the advice of his key international ally, the United States government. There were long-standing political issues in Pakistan including the recent attempt to assassinate Benazir Bhutto. Why declare a state-of emergency now? What are likely to be the consequences?

In declaring a state-of-emergency, Musharraf seems to have pleased no one. He was concerned with the challenge to his legitimacy as President coming in a significant and sustained way from the legal profession (lawyers have been unhappy for some time now with his attitude towards the judges and the law) as well as from the country’s Supreme Court. Musharraf has been in sustained conflict with the independent judiciary and is still engaged in their vilification. Many High Court judges and members of the Supreme Court have stood out against taking an oath of allegiance. Many are now reported as being under house arrest for opposing the instrument Musharraf has issued to suspend the constitution. The legal profession at all levels has really found its independent voice and is standing for constitutionality and the rule of law. He has been concerned, as ahve the Americans, about the religious right in Pakistan and the actions of the Taliban in frontier areas but now he is a leader of a state that is in internal conflict with a significant set of legal institutions central to the function of the state. Resources will need to be diverted from dealing with the Taliban to enforce the state of emergency and to engage in the struggle against the lawyers and other opposition groups. This is not good news.

There are other parts of the state system that are also facing problems. Given its failure to cope with a deteriorating security situation, both in the frontier provinces but also in other contexts, the army is said to be demoralized. It seems, according to the BBC news web site, that given the paralysis in the courts the army courts are trying citizens accused of ‘treason’, including recalcitrant lawyers. This will bring the army into direct conflict with civilians, their families and supporters. If this adds to the general feeling against the state-of-emergency, then nobody knows what is likely to happen. Under the stress say of a mass demonstration, it will become a question of individual and group loyalty. The present situation can only reinforce detrimentally the army’s role in politics and weaken its stand against the Taliban. If the army’s support for Musharraf weakens then he could face a challenge from within its ranks.

The United States encouraged Bhutto and Musharraf to find a deal that would make it easier to have democratic elections early next year. Bhutto has already been placed (briefly) under house arrest. Other politicians are now under house arrest including Imran Khan. Bhutto has called for civil action against the state-of-emergency but she has to decide whether to cooperate and push for the desired general election or throw herself into very active opposition. If she decides to organize the Pakistan Peoples’ Party against the state-of-emergency then Musharraf is in serious trouble for this is a broadly-based party and not simply vocal groups of the professional middle-class.

State-of-emergency is one thing and martial law is another. Many people inside Pakistan feel that what is happening is martial law. Even if there are serious security issues, it is hard to see how the present system will make elections possible. An election would help sort out many of the issues that are plaguing the country. Musharraf is concerned about his own survival. Bhutto will be concerned about her survival and credibility. Will she throw her lot in with the popular opposition or will she negotiate with Musharraf? Is she strong enough to play both parts? Musharraf has caused concern in Washington. He can expect continued pressure for change both from within and from outside. There is a sense that the state-of-emergency has created more problems that it seems capable of solving.

November 2, 2007

Duluthian Dilemmas and the global economy

It is a long way from Duluth Minnesota to either India or Iran yet this week has demonstrated in this area the inter-connected nature of the global economy and of its inevitable counter-parts, global and domestic politics. Of course Duluth is situated near the centre of the vast geographical dimensions of North America but it is also connected to the North Atlantic through the Great Lakes and down the St. Lawrence Seaway. Inter-connections are the stuff of daily experience for some of its citizens. Even so, the potential inter-connection between Duluth (or rather its hinterland), India and Iran is a significant if surprising set of linkages. How does this relationship come about? What are the international and domestic ramifications of the potential inter-relationships?

This is a news story that involves Essar Global Limited (a significant Indian multi-national corporation), Nashwauk Minnesota, the State Governor of Minnesota (Governor Tim Pawlenty), the State Department and its application of sanctions on Iran, as well as the United States Ambassador to India. Students of political economy should take note of the complex set of inter-relationships that the proposed development by Essar Global of a steel slab plant in Nashwauk involves. If you thought that ‘the market’ was a relatively uncomplicated means of allocating resources, think again!

Essar Global is a diversified India-based multinational corporation. The rise of Indian multi-nationals is a relatively new phenomenon but it has already caused ‘the dance of the giants’ (think of the impact of rapid economic development in India on IBM). Steel production and steel products are at the core of its business but it should be thought of a highly diversified in that it has shipping interests, construction interest and oil and power interests. It is big and effective. It is also investigating a proposal to build an oil-refinery in Iran, allegedly in partner-ship with the Iran government. The Indian government does not, in so far as I am aware, apply sanctions on Iran. It is not therefore illegal for Essar to build an oil-refinery in Iran.

Nashwauk Minnesota is a small community with a population that is aging. It is located on the Iron Range, just west of Hibbing. It has low levels of average income when compared of the State of Minnesota as a whole. Housing is relatively cheap in comparison to the State average. Nashwauk and the surrounding communities would benefit significantly in economic terms from the proposed steel slab-making plant. For the plant to succeed, local infra-structure needs to be improved and developed. This requires State support at a level of funding that is not insignificant. The State Governor who has been a long-term supporter of the planned investment decided that given the unilateral sanctions being imposed by the United States on Iran to seek Federal clearance. The local company in Nashwauk would be an American registered corporation but the parent company would be located elsewhere. The Governor decided to seek legal clarification in Washington. This will no doubt cause some consternation as the United States needs to think about the nature of its relationship with India as well as its policy on sanctions.

What does all of this add up to?

It shows that even in Northern Minnesota is necessary to be aware of the global economy and its many ramifications. It shows that globalization is beginning to bring to the attention of the Western world the potential for new and dynamic multi-nationals (in addition to these of the Japanese and South Koreans that has disrupted domestic industry in the past and continue to do so for example in the automotive industry) capable of operating globally and challenging long-established producers. It shows that all aspects of internationalization (trade and investment flows) have specific domestic implications in specific economic settings. Trade and investment together are political issues for good or bad. It shows that sanctions can be a sword that has the potential to cut both ways. It shows that with a diversified world economy, sanctions need to be coordinated multilaterally for them to have the possibility of major impact on a targeted economy. It shows that workers and young professionals in Duluth Minnesota need to be aware of the global economy for it is so much closer than ever before.